Determining the net present value method

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Hamilton Control Systems will invest $90,000 in a temporary project that will generate the following cash inflows for the next three years.

Year

Cash Flow

1............$23,000

2............38,000

3............60,000

The firm will be required to spend $15,000 to close-down the project at the end of three years. If the cost of capital is 10 percent, should the investment be undertaken? Use the net present value method. [Hint: For Year 3, net out the cash inflow and cash outflow.]

Reference no: EM131868687

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